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Centre releases Rs 36,400-cr GST compensation to states for 3 months till February

Centre releases Rs 36,400-cr GST compensation to states for 3 months till February

The Centre has released Rs 36,400 crore as GST compensation to the states and union territories for three months till February 2020.

For the April-November 2019 period, the Centre had already released Rs 1,15,096 crore to compensate states and UTs on account of revenue loss due to implementation of the Goods and Services Tax (GST).

“Taking stock of the current situation due to COVID-19 where state governments need to undertake expenditure while their resources are adversely hit, the central government has released the GST compensation of Rs 36,400 crore to the states/UTs with legislature for the period from December 2019 to February 2020,” an official statement said.

The Centre had released Rs 69,275 crore in 2018-19 and Rs 41,146 crore in 2017-18 as compensation for GST which was rolled out on July 1, 2017.

The cess collection in 2019-20, 2018-19 and 2017-18 fiscal was Rs 95,000 crore, Rs 95,081 crore and Rs 62,611 crore, respectively.

As the compensation requirement of the states was less than collection in the first two years (2017-18 and 2018-19) of GST rollout, Rs 47,271 crore GST compensation cess collected had remained unutilised in the compensation kitty.

Under the GST law, states were guaranteed to be paid for any loss of revenue in the first five years of the GST implementation from July 1, 2017. The shortfall is calculated assuming a 14 per cent annual growth in GST collections by states over the base year of 2015-16.

Under the GST structure, taxes are levied under 5, 12, 18 and 28 per cent slabs. On top of the highest tax slab, a cess is levied on luxury, sin and demerit goods and the proceeds from the same are used to compensate states for any revenue loss.

There were no differences between the Centre and states with regard to compensation payment in 2017-18, 2018-19, and in the first four months (April-July) of previous current fiscal (2019-20).

However, with revenue mop-up from compensation cess falling inadequate, the Centre held back fund transfer to states for revenue shortage beginning August 2019, following which states raised the issue.

Source: Economic-Times.

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Large companies fear losing out on GST credit if vendors, suppliers go bankrupt due to Covid crisis

Large companies fear losing out on GST credit if vendors, suppliers go bankrupt due to Covid crisis

With many small and medium enterprises staring at bankruptcy or severe business disruption due to the Covid-19 crisis, large companies that buy raw material and products from them now have to deal with a new problem: denial of credits if the vendor defaults on paying goods and services tax.

According to the GST framework, large companies cannot claim credits unless their suppliers and vendors have paid the tax. Section 16 of the GST law says that if a vendor does not pay GST to the government, input tax credit will be denied to the buyer.

Companies with a large supplier base across sectors are now reaching out to their vendors to check if there is a possibility of a default from their side.

“The additional liability cast on businesses for ensuring payment of tax by the supplier has been a rising concern since inception because of the practical difficulties in verifying the same and the financial burden even though the tax is paid to vendors,” said Abhishek Jain, a tax partner at EY. “This obligation has drawn attention in these difficult times owing to apprehensions of defaults by vendors with the currently spread financial flu.”

The nationwide lockdown has broken the back of the SME sector. The coronavirus triggered restrictions that shut businesses abruptly and left smaller companies facing a crushing cash crunch. Major raw material and labour shortages along with a demand pullback from the industry created an existential crisis for many.

Industry experts said many large companies have been putting in place some steps to manage the situation.

“Large businesses are considering indemnity arrangements to safeguard themselves from vendor defaults arising from the extended timelines for GST payments and returns provided to smaller businesses. There is also a need to re-evaluate the vendor selection policies based on previous compliance track records,” said MS Mani, a partner at Deloitte India.

According to people aware of the matter, some companies have asked their vendors and suppliers to give them an indemnity letter.

“The letter is essentially a legal document that asks vendors to pay GST on time and be held responsible if there is a GST default or if any interest or penalty is charged to the company due to a vendor’s delay,” said one person.

Input tax credit can be claimed only after a vendor has paid the tax and uploaded the correct invoice on the GST portal. The invoices are matched with the credit eligibility of the company. Full credit is allowed if there is 90% accuracy or if there is a problem with 10% of the invoices.

A few of the larger companies, especially in the automobile and other manufacturing sectors, are not taking chances, experts said.

“Some of the large companies are holding back on payments to vendors and suppliers for two months as a pressure tactic. This is to make sure that they pay up the GST on time and the company is able to avail of tax credits,” said a tax expert who advises large companies.

Source: Economic-Times


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GST Council to discuss waiver of late fee for August 2017 to January 2020

GST Council to discuss waiver of late fee for August 2017 to January 2020

The GST Council in its next meeting will discuss waiver of late fee for non-filing of GST returns for August 2017 to January 2020 period.

In a tweet, the Central Board of Indirect Taxes and Customs (CBIC) said, “Issue of GST late fee for the past period (August 2017 to January 2020) to be discussed in the next GST Council meeting.”

The next meeting of the GST Council is likely to be held on June 14.

The CBIC said there have been demands for waiver of late fee for returns which were required to be filed from the beginning of Goods and Services Tax, that is August 2017.

For helping small businesses, having turnover of less than Rs 5 crore, in the current situation arising out of COVID-19, Finance Minister Nirmala Sitharaman had already announced extension of GST returns of February, March, April and May 2020 till June 2020. No late fee will be charged for this period, it said.

The CBIC said late fee is imposed to ensure that the taxpayers file return in time and pay taxes on the amount collected from buyers and due to the government.

This is a step to ensure that a certain discipline is maintained regarding compliance. Honest and compliant taxpayers would be discriminated negatively in the absence of such a provision, it added.

“In GST all decisions are taken by the Centre and the state with the approval of the GST Council. It would not be possible or desirable for the Central government to unilaterally take a view on this issue and therefore, the trade is informed that the issue of late fee would be taken up for discussion in the next GST Council meeting,” it said.

Source: Economic-Times

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GST collections down 70% in April

GST collections down 70% in April

Centre may have held over the monthly GST collection figures for April, but data released by the Comptroller General of Accounts (CGA) suggests that GST collections have seen a precipitous drop of up to 70 per cent in April.

Data released by the Comptroller General of Accounts (CGA) for April 2020 shows that the Centre’s share of GST collection during the month was a paltry Rs 16,707 crore compared to Rs Rs 55,329 crore in the previous year, a drop of 70 per cent. Usually, the GST numbers announced by the government comprise collection by both the Centre and states. However, CGA’s data only shows the Centre’s share of the GST collection.

In April 2019, total GST collection – state and Centre included – was Rs 113,865 crore. Extrapolating from the Centre’s GST numbers (Rs 16,707 crore) for April, 2020 the total GST collection – Centre and State – could be around Rs 34,300 crore.

The sharp drop in the GST collection in April 2020 could partly be because of lockdown due to coronavirus outbreak. However, it is to be noted that April GST collections are for March transactions, and the lockdown started only from 25 March.

Therefore, the poor collection in April could be mostly due to extension of return filing dates. On March 24, the government announced several measures to ease the compliance burden on taxpayers given the outbreak of Coronavirus.

As per the announcements, for registered GST taxpayers with aggregate annual turnover less than Rs 5 crore, the last date for filing GSTR-3B due in March, April and May 2020 by the last week of June 2020. For such taxpayers, no interest, late fee, and penalty were to be charged.

For those whose turnover is Rs 5 crore or more, could file returns due in March, April and May 2020 by last week of June 2020 but the same would attract reduced rate of interest at 9 per cent per annum from due date (current interest rate is 18 per cent per annum). No late fee and penalty to be charged, if complied before till June 30, 2020.

Source: Business-Today.

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CBIC enables Facility for Registration of Insolvency Resolution Professionals on GST Portal

CBIC enables Facility for Registration of Insolvency Resolution Professionals on GST Portal

The Central Board of Indirect Taxes and Customs ( CBIC ) has enabled the facility for registration of Insolvency Resolution Professionals/ Resolution Professionals (IRPs/RPs) on the GST Portal.

Insolvency Resolution Professionals/ Resolution Professionals (IRPs/RPs), appointed to undertake corporate insolvency resolution proceedings for Corporate Debtors, in terms of Notification. No 11/2020-CT, dated 21st March 2020 can apply for a new registration on GST Portal, on behalf of the Corporate Debtors, in each of the States or Union Territories, on the PAN and CIN of the Corporate Debtor, where the corporate debtor was registered earlier, within thirty days of their appointment as IRP/RP.

They should select the Reason for Registration as “Corporate Debtor undergoing the Corporate Insolvency Resolution Process with IRP/RP” from the drop-down menu.

The date of commencement of business for IRP/RPs will be the date of their appointment. Their compliance liabilities will also come into effect from the date of their appointment.

The person appointed as IRP/RP shall be the Primary Authorized Signatory for the newly registered Company.

In the Principal Place of business/ Additional place of business, the details as specified in the original registration of the Corporate Debtors are required to be entered.

The new registration application shall be submitted electronically on GST Portal under DSC of the IRP/RP
The new registration by IRP/RP will be required only once. In case of a change in IRP/RP, after an initial appointment, it would be deemed to be a change of authorized signatory and not an appointment of a distinct person requiring a fresh registration.

In cases where the RP is not the same as IRP, or in cases where a different IRP/RP is appointed midway during the insolvency process, the change in the GST system may be carried out by a non- core amendment in the registration form.

The change in Primary Authorized Signatory details on the portal can be done either by the authorized signatory of the Company or by the concerned jurisdictional officer (if the previously authorized signatory does not share the credentials with his successor) on request of IRP/RP.

Source: TaxScan.

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Finance Ministry not considering calamity cess on GST

Finance Ministry not considering calamity cess on GST

The Finance Ministry is not considering imposition of calamity cess on the GST as businesses are grappling with low sales and declining demand, sources said. Reports had earlier said that the central government is considering a calamity cess on the Goods and Services Tax, similar to flood cess imposed by Kerala in June last year.

Ministry sources said that in the present economic scenario during the COVID-19 pandemic, any purported proposal of introducing a calamity cess would be nothing less than an adversity itself.

This would prove to be counter-productive, as sales are already at low volume and the industry is facing a deep crisis for want of demand and likely labour challenges, a source said.

“Any such measure would further dampen the consumers’ sentiment and could weaken markets’ strength, especially when the government is endeavouring its best to boost the consumption,” the source said.

Also internationally, no country has tried such imprudent fiddling with their existing tax regimes during COVID time. None of the countries, developed or developing, have increased taxes to counter economic impact of the pandemic, the source added.

Congress leader Kapil Sibal had earlier in the day tweeted: “Even the RBI admits growth this year will be in negative territory. Don’t even think of a “calamity cess” on the GST. That will be another “calamity”, he said.

Source: Economic-Times.

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GST Council Likely To Meet In Second Week Of June

GST Council Likely To Meet In Second Week Of June

The GST Council is likely to meet in the second week of June according to media reports. The Council meeting will discuss the impact of the coronavirus pandemic on the economy of states, among other things.
The meeting of the GST council comes in the wake of repeated requests from state chief ministers in their video interactions with the Prime Minister for releasing dues to the states.

The GST council meeting is likely to discuss steps to raise compensation collections to clear the dues of the states. It is also likely to take up GST revenue trends which have hit rock bottom during the lockdown period following the outbreak of the coronavirus pandemic.
The GST Council is an apex member committee which was formed to modify or reconcile any law based on goods and services tax in the country. The council is headed by Union Finance Minister Nirmala Sitharaman and comprises finance ministers of all the states of the country.

The scheduled GST Council meeting could turn out to be a stormy one in the light of the fact that several states have been batting for higher allocations. Chief Ministers of several states had also stressed on the need to release GST dues in their video interactions with Prime Minister Narendra Modi.

Source: The-Hans-India

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CBIC clears Rs 11,052 cr GST refund claims since April 8

CBIC clears Rs 11,052 cr GST refund claims since April 8

The Central Board of Indirect Taxes ( CBIC) on Monday said it has sanctioned GST refund claims worth Rs 11,052 crore in 47 days.

In a tweet, the CBIC said it is “committed to ensuring liquidity to GST taxpayers especially MSME sectors during the lockdown”.

The tweet added that 29,230 refund claims amounting to Rs 11,052 crore disposed of between April 8-May 24, the CBIC added.

Refunds have been sanctioned while ensuring work from home, it added. The finance ministry had on April 8 said that to provide relief during COVID-19 it has been decided to issue all pending GST and custom refunds which would benefit around 1 lakh business entities, including MSME.

The total refund granted will be approximately Rs 18,000 crore, it had said.

The CBIC had earlier asked its field officers to avoid asking for physical submission of documents from entities who are claiming GST and Customs refunds and instead use official email for all communication.

The CBIC had said that the decision to process pending refund claims has been taken with a view to provide immediate relief to the taxpayers in these difficult times even though the GST Law provides 15 days for issuing acknowledgement or deficiency memo and total 60 days for disposing off refund claims without any liability to pay interest.

Source: Economic-Times

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Consumer companies seek GST cut to help push sales

Consumer companies seek GST cut to help push sales

Consumer-facing companies including makers of biscuits, ayurveda products, soaps and shampoos have asked the government to reduce the goods and services tax rates to help revive demand as the lockdown eases.

“With constraints of disposable income, reduction in GST would spur demand of essential categories,” said Arup Chauhan, executive director of Parle Products, the country’s biggest biscuit company and maker of Monaco, Hide & Seek and Marie cookies. Biscuits under Rs 100 a kg are taxed at 18% and are price-sensitive categories, 40% by volume and 30% by value of the overall category.

The GST Council, which is expected to meet next month, had slashed tax rates on 200 products including chocolates, toothpastes, shampoos, washing powders and shaving creams to 18% from 28% in November 2017. Industry executives said a further reduction is needed to trigger demand.

“Reduction in GST for basic categories from 18% would create a demand stimulus, which is critical to revive the economy,” said Arvind Mediratta, managing director of wholesale retail chain Metro Cash & Carry.

The government’s Rs 20 lakh crore stimulus package had focused more on propping up the supply-side with long-term results rather than spurring demand in the short term, industry officials said.

Companies making ayurveda-based products such as Dabur and Baidyanath have sought a GST reduction to 5% from 12%, given that the government itself is pushing the consumption of ayurveda-based foods to boost immunity.

Dabur’s chief executive Mohit Malhotra said a uniform 5% GST for the entire ayurveda product and medicine range would spur much-needed demand.

“A uniform 5% GST would help popularise ayurvedic products, which are gaining acceptance among consumers because of their immunity-building properties,” Malhotra said.

Presently, 5% GST is levied on classical ayurvedic medicines, which account for 20% of the category. All other ayurvedic products fall under proprietary and over-the-counter categories, which attract GST of 12%.

In a report released late last month, market research firm Nielsen slashed its growth outlook for the fast-moving consumer goods sector to 5-6% for 2020, lower than its earlier projection of 9-10%.

Source: Economic-Times

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GST Analytics wing to identify risky suppliers to exporters

GST Analytics wing to identify risky suppliers to exporters

The CBIC has asked GST risk management wing to conduct supply chain analysis to identify risky major suppliers to exporters and share it with jurisdictional field officers. The Central Board of Indirect Taxes (CBIC) had received representations from exporters saying in some cases the Integrated GST (IGST) refunds are getting delayed by over 6 months.

Last year, the CBIC had detected several cases of firms availing credit fraudulently through refund of Integrated Goods and Services Tax on exports of goods.

To mitigate the risk, the CBIC has taken measures to apply stringent risk parameters based checks, and the consignment of such exporters in risky category are subject to 100 per cent Customs examinations and their refunds were kept in abeyance.

The CBIC, which had in January issued a standard operating procedure (SoP) to be followed by such exporters, has now asked GST and Customs Zonal principal chief commissioners to forward all pending verification report to Directorate General of Analytics and Risk Management (DGARM) by June 5.

“The zonal Peincipal Chief Commissioners/chief commissioners of CGST and CX zones are advised to put a process in place to ensure that in future all such verifications are completed and reports sent to DGARM within maximum 3 weeks of receipt of request of verification from DGARM,” the CBIC said.

While partially modifying the SoP issued in January, the CBIC said in order to cut down the time taken in grant of NOC (no objection certificate), the DGARM will “conduct supply chain analysis without waiting for verification report from field and share risky first and second level major suppliers with the jurisdictional CGST (Central GST) formations at the same time when the risky exporter details are shared with the CGST formations”.

The verification report in respect of identified suppliers will be sent by GST and customs Commissionerates directly to DGARM, which will take decision on grant of NOC or otherwise based on such verification reports in respect of exporters and its suppliers.

“DGARM would grant final NOC to the exporter once the verification of the identified first and second stage risky supplier is found in order,” CBIC said.

In case of availment of in admissible credit by the suppliers, the GST officers will ensure due process of recovery. If the taxpayer is under the administrative control of states/UTs, the issue of recovery would be flagged to them, the CBIC said.

Associates Senior Partner Rajat Mohan said exporters have a vested right of tax refunds unless they are proven guilty.

“With an internal memo from GST policy wing looping in the senior-most tax officers in a state is expected to ease the plight of exporters,” he said.

Source: Economic-Times.

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